THE WAR BOND STORY No one is better qualified to write a history of the War Bond program than Larry Olney. He was one of a very few career Treasury officials who were brought in on the early planning of the Defense Bond program in 1941. He served as Associate Field Director during the entire war period. From this vantage point, being a party to both planning and execution, he is in an unusual position to document not only what happened, but why. This work is an important contribution to the history of the financing of the Second World War. The Savings Bonds Division wishes to thank Mr. Olney for making this manuscript available for publication. Elmer L. Rustad National Director U. S. Savings Bonds Division December 10, 1971 PREFACE This is a story of the War Bond program during the war years of 1941 through 1945. It is a story of four men who planned, organized and operated the most successful promotion, advertising and government financing program this world has ever known -- Secretary of Treasury Henry Morgenthau, Jr., Harold Graves, Assistant to the Secretary, Dr. Peter Odegard, professor at Amherst College and Theodore (~ed)Gamble, businessman, Portland, Oregon. It is also a story of thousands of patriotic American volunteers who made the program succeed. These volunteers did not ask what.their government could do for them -- they did what they could for their governqent. Never question the fact that when the "chips are down" and this country is in danger, the people of the United Stc?.tes will do their part in any worthwhile government program, if responsible leaders tell them what they want done. One must understand, in writing the War Bond story, it was impossible for any one person to know about every promo- tion or activity of the program. It covered too much area. The thousands of volunteers were prominent citizens from banking and finance, industry, labor unions, schools, adver- tising, minority groups and every phase of American life. After each sta,te was organized they operated in an independent manner. Programs, promotions and materials were presented which they could accept or reject. This was not a military organization and it did not operate as employer and employee. It was in September 1939 when I first met Harold Graves. I had been working on tax fraud cases in Boston as Special Agent of the Intelligence Unit, Treasury Department. My Chief, Elmer Irey, had phoned me to report to his office in Washington at once. I presumed it was another tax fraud case. It was'a surprise when he advised me that Graves wanted to see me at the Treasury. I was not very enthu- siastic about such an interview. Graves had an unfavorable reputation among the agents of being tough, unreasonable, and if he thought an agent was inefficient in any way, he would "cut him to pieces." On entering Gr-aves' 'outer office I couldn't help overhear Special Agent Barker explain to Graves that he had been away for over three months and he wanted to return home. Graves spoke up sharply, "~llright, Barker, you're excused, but I want you to understand you've missed the boat." On that note I was ready to leave myself. With some reluctance I entered Graves' private office and was greeted with a "Thank you for coming," and a pleasant smile. Briefly he outlined my new assignment. I was to work with Agent in Charge Cliff Mack on a thorough examination of the Procurement Division of the Treasury. This was a large operation, purchasing most of the supplies and equipment for all government agencies, except war materials for the Armed Services. At that time it would have been hard for me to believe that for the next five years Graves and I would be working together as very close friends; that he would become my ideal of a top government executive; and we would be a part of a team that would plan, organize and put into operation the War Bond program. After about a year of hard work, long hours and many interruptions caused by special investigations, Grand Jury cases and conferences, we completed the reorganization of the Procurement Division. If we were going to be drawn into the ~varin Europe, this division could be enlarged quickly. As we were about ready to make our report, Cliff informed me that Graves had offered him the position of Director of the Procurement Division and he would like me to become Assistant Director. I told him I would be interested if Graves and Irey approved. A few days later Graves called me to his office, "Listen Larry, I can't take two top men from the Intelligence Unit and put them in one spot. Besides, I have a lot more work ahead for you. As soon as you finish your report you can take a few weeks leave over the holidays and return to your home in California. I'll call you when I'm ready for you. 'I It was January 2, 1941 when I returned to Washington and reported to Harold Graves. The war had been going badly for England, and France had fallen to the Germans. Graves greeted me warmly and explained there were two divisions he wanted me to examine -- Foreign Funds Control and the Savings Bonds Division. He asked me to start on the Foreign Funds Control first as their cases were bogged down badly and they needed a change in their system of processing them. He wasn't sure whether they were going to enlarge the Savings Bonds Division or start a new division. A few days' examination of the Foreign Funds Control disclosed it was necessary that I have some help. I asked Graves for Charlie Adams who had worked with us in the Procurement Division. Charlie had been in the Treasury Accounts section -- young, alert and a good worker. With his assistance we made good progress. In the early part .of February, at a conference with Graves, I met Dr. Peter Odegard. Graves explained that Dr. Odegard had been asked by the Secretary to come to Washington for a conference on a Treasury policy matter. At the conference he asked Odegard to present a statement of objectives for a Defense Bond program. I liked Odegard at once. He was a professorial type, intelligent and cordial. On February 26, 1941, I had a long conference with Graves. First, we went over the situation at Foreign Funds Control and decided another few days' work and the report could be written. Graves then said, "Larry, you've been doing a lot of reorganization of government departments , now I want you to start a new department which we are going to call the Defense Bond Division. In the meantime I want you to release Adams so he can set up some offices. As soon as you finish your report I want you to come over and get into it." I asked about the present Savings Bonds Division. He replied, "We are working that out and it looks like we '11 probably eliminate that department and tie it into the Defense Bond organization." Due to another assignment, it was not until April 10 that I could report to the Defense Bonds. However, during this period I had several conferences with Graves at which he kept me informed on the progress, the decisions that had been made and the plans. My assignment to the Defense Bond program was not a transfer but a special assignment. It was my understanding, and Graves did not indicate otherwise, that after a Washington Staff was established and a field organization functioning, I would return to my Intelligence Unit. CHAPTER I THE U. S. SAVINGS BONDS DIVISION The first "baby bond" officially known as the Series "A" United States Savings Bond, was issued March 1, 1935. Legisla- tion was passed by the House and Senate in January and signed by the President on February 4, 1935. The program was originated by Secretary of Treasury, J Henry Morgenthau, Jr. Previously he had taken a trip abroad to England and France, where he became impressed by the benefits of small denominational government bonds offered to the people at large. At the time the Savings Bonds were being discussed, the government was about to undertake a number of programs to relieve the unemployment situation throughout the country. An appropriation bill for $4,800,000,000 was pending -- a huge sum for those days. This required deficit financing. Treasury officials wanted to avoid having the new securities held by a relatively few buyers -- the banks and wealthy individuals. They believed that widespread holding of the national debt was a sound principle of government financing. The Savings Bond was an instrument of government showing an evidence of debt. It was not a marketable security which fluctuated in price like the old Liberty Bond of World War I. It recorded that John Doe had loaned his government a number of dollars which the Treasury promised to pay back with interest at the end of so many years. If John Doe needed the money in the meantime, he could redeem his bond with interest. There were three sound objectives of the Savings Bond program: 1. To instill into the minds of the American people the habit of thrift ; 2. To educate the people with respect to government securities; 3. To bind the people closer to their government, not only in financial affairs, but for its total well-being -- a Savings Bond was "A Share in America." The baby bonds were purchased at 75% of their ten-year maturity value -- $25, $50, $100, $500 and $1000.